BUS650:Week 3 Assignment 1 Jocquetta D. Harris BUS 650: managerial Finance (NAJ1240A) Martin Cain October 22‚ 2012 Complete Chapter 12 Closing Case at the end of the chapter and submit answers to your instructor. 1. Most publicly traded corporations are required to submit 10Q (quarterly) and 10K (annual) reports to the SEC detailing their financial operations over the
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Leverage Project A Project B Project C Project D 0% 15.2% 15.2% 16.4% 14% 20% 17.51% 17.51% 18.92% 16.1% 50% 24.44% 24.44% 26.48% 22.4% Do you think the CAPM model is an appropriate way to calculate the cost of equity for these projects? Why or why not. The CAMP model is an appropriate way to calculate the cost of equity for these projects because of the information provided. The information provided is the beta‚ the risk-free rate‚ and market risk premium Which‚ if any‚ of
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Hill Country Snack Foods is a company which produce variety of snacks. Their operating strategy is a combination of good products‚ efficient and low-cost operation‚ and singular management. * Good products are not only about high quality‚ but also about to satisfy different type’s customers by producing many kinds of snacks. Customers are satisfied by companies’ quick react to their requirements or preferences and reinvent and expand its products. For example‚ the company has also tried to change
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Does the company have any preferred stock? If so‚ calculate Rps Intel does not have any preferred stock. Estimate the cost of common stock Rs using CAPM (aka‚ the required return) http://finance.yahoo.com/bonds dividend and yield=4.20%(on yahoo finance summary for intel page) CAPM Rs=Rf+Beta(E(RM)-Rf) 10 year Treasury bond rate Rf= 1.81% Beta =0.98 10 year (2003-2013) arithmetic average of S&P500 = 5.69% MRP= 6.675 – 1.81 =4.86% Calculate beta using monthly returns for the past 24 months
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Case Study on Nike Inc. What is the WACC and why is it important to estimate a firm’s cost of capital? The WACC is a firm’s overall cost of capital‚ taking into account the weighted average of its equity and debt costs of capital. A firm’s WACC is the minimum return (hurdle rate) required by its capital providers to stay invested. Therefore managers of a firm should only invest in projects that generate returns exceeding the firm’s cost of capital. For the company’s owners the WACC is the minimum
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Cicero Mines Investment Analysis Part 1: Project Evaluation When making capital budgeting decisions‚ there are various techniques that can be utilised. Ross et al. (2008) describes that the predominant capital budgeting methods used as being the Net Present value (NPV) method‚ the Internal Rate of Return (IRR) method‚ the Payback method‚ and the Accounting Rate of Return (ARR) method. Conversely‚ Brealey‚ Myers and Allen (2011) proposes that the NPV and IRR methods are considered prestige compared
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case analysis takes into consideration the post 2001 period in which PepsiCo acquired Quaker Oats Company. The case analyzes the rivalry and competitive relationship between PepsiCo and Coca Cola. The case puts forward the concepts of EVA WACC and CAPM. The main goal of the case is to analyze the health of both companies in relation to EVA. As far as past performance is concerned Coca Cola is experiencing a decline in its EVA. The cost of debt and the cost of equity for both companies are almost
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and 10 percent. c. Between 15 and 25 percent d. More than 30 percent e. Impossible to estimate 2. A project has an expected cash flow of $200‚ in year 1. The risk-free rate is 6%‚ the market rate of return is 16%‚ and the project’s beta is 1.5. Calculate the certainty equivalent cash flow for year 1. a. $175.21 b. $164.29 c. $228.30 d. $212.56 e. None of the above 3. Share X has a standard deviation of return of 10%‚ share Y has a standard deviation of return of 20%. The correlation coefficient between
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cost of equity is calculated using the CAPM. The relevant market risk premium comes from the American market‚ which can be approximated by the S&P500 composite performance. Since Marriott is a US stock and most investors are assumed American‚ they will require a risk premium consistent with US market performance. Marriott’s equity beta is 0.97 (Exhibit 3). We further assume that the 1986-87 period is representative for future performance. According to the CAPM the required return on equity is determined
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acetate in the mixture is to be 100.0 Ib-mole/h. What must the mixture flow rate be in Ibm/h 6. The feed to an ammonia synthesis reactor contains 25 mole% nitrogen and the balance hydrogen. The flow rate of the stream is 3000kg/h. Calculate the rate of flow nitrogen into the reactor in kg/h. 7. A mixture is 10.0 mole% ethyl alcohol‚ 75.0 mole % ethyl acetate (C4H8O2) and 15.0 mole% acetic acid. Calculate the mass fractions of each compound. What is the average molecular weight of the mixture
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